“It’s kind of been an ongoing discussion,” said Christopher Hanson, director of Austin’s Employees’ Retirement System. “What’s going on in Dallas has cast a shadow on other public retirement systems in the state.”

Austin’s pension administrators say the system here is OK — or, at least, more OK than the systems in other Texas cities — despite warnings from observers of mounting debt.

The retirement funds here have debt, but the city is paying it down, officials said. They’re not fully funded, but they will be within the next 30 years or so. Their returns haven’t been as high as projected. But officials have responded to the shortfall with more money from city coffers and implemented reforms in 2011 to lower costs.

“The fund wasn’t in very good shape back then” said Ed Van Eenoo, Austin’s deputy chief financial officer, who sits on the board of the Employees’ Retirement System. “It had an infinite amortization period, which is fancy speak for the fund had debt it wasn’t expected to meet.”

Austin has three pension systems: one for police, one for fire personnel and one for rank-and-file city employees. All three funds operate independently, and, in the long term, if they came up short, taxpayers would be on the hook.

The fire system is in the best financial shape. It was 90 percent funded last year, while the police and employee systems were 67 and 68 percent funded. Financial standards generally consider pension systems healthy if their funding is about 80 percent or higher.

Houston’s municipal pension, by comparison, is funded at about 52 percent, according to the Houston Chronicle. But it’s hard to draw apples-to-apples comparisons between cities because of the different ways their funds are managed and their long-term projections.

Austin is expected to pay $171.9 million into its three pensions this fiscal year, accounting for 4.7 percent of the city’s $3.7 billion operating budget. That’s lower than the median of 6 percent of operating revenues that Moody’s found in a recent evaluation of large local governments. But Austin’s contribution has steadily grown from 3 percent in 2007.

The increase corresponds to a growth in city contributions, from 8 percent of employee salaries to 18 percent for the regular employee system, and from 18 percent to 21 and 22 percent for the police and fire funds.

Austin has $2.7 billion in pension debt, meaning obligations to future retirees beyond the dollars in the fund now, according to a Moody’s analysis last month. It ranked Austin 14th in local government pensions with the largest amount of debt relative to operating revenues, ninth among cities. Chicago, Dallas, Phoenix, Houston and Los Angeles are the largest.

Trends are consistent nationwide, the report said. Unfunded pension liabilities have grown rapidly in the past 10 years, consuming a greater and greater share of government budgets. Investment portfolios have underperformed, leaving taxpayers or future funding to fill the gap.

“It is concerning that Austin is on this list, and they’re not very far down the list,” Josh McGee, an economist with Houston’s Laura and John Arnold Foundation, said of the Moody’s report.

Last month, McGee wrote a foreboding report on Austin’s pension system, warning that its debt was increasing and its funding ratio had dropped nearly 20 percentage points in eight years. Yet he called those challenges pretty similar to many in the rest of the country, not an outright problem yet.

“It’s more of a slow burn scenario,” he said. “What we’re saying in the report is, this is not a crisis, or close to it, but it’s a rising cost.”

Hanson said Austin has already taken steps to avoid a pension crisis. Five years ago, the system raised retirement eligibility for new hires and lowered the multiplier used to calculate final pensions. Those savings for the city will start to kick in when recent hires start to retire, he said.

The challenges that the fund faced were due to the cost of employees under the previous plan and lower than expected investment returns through the early to mid-2000s, Hanson said. “So that’s when the board sat down and created reforms to address that,” he said.

Debt is estimated to be paid off in 33 years for the employee system, 31 years for the police system and 12 years for the fire system.

With regard to the Moody’s report, Hanson said its calculations assumed a lower rate of return on investments than Austin expects to hit, and so its numbers were significantly different from the city’s numbers.

Austin treasurer Art Alfaro, who sits on the boards of the police and fire pension systems, called the debt a function of growth and less important than long-term projections.

“I can see people asking, ‘Are Dallas and Houston the canaries in the coal mine?’ ” Van Eenoo said. “And they may be. They may be a wake-up call for some pension systems. But I really think we’ve been awake since the Great Recession.”

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